Capital Gains and Your Property Sale
Mortgage interest and property tax deductions aren’t the only tax benefits that are available to homeowners. Selling your home comes with its own tax break too. You can sell your primary residence and make up to $250,000 in profit if you are a single owner and $500,000 if you are a married couple, and not owe the IRS a dime!
This is big news to some homeowners who have been on the property ladder for a while as prior to May 1997; the only way that you could avoid paying taxes on your home sale profit was to buy another, more expensive home within a two year period. If you were over 55 in 1997 you could choose to opt in to a once-in-a-lifetime tax exemption of up to $125,000 in profits!
If you purchased your house pre-1997 then don’t panic! The law change applies to all residential sales since it came into effect and there is no limit on the number of times you can use it to your benefit. That means that you can make profits of upwards of $250,000 (depending on your circumstances) every single time you sell your home. There are conditions to this, such as you need to have used your home as your primary residence for at least two years out of the five-year period ending on the sale date. Your tax expert will be able to give you advice based on your personal circumstances. Even if you don’t meet some of the conditions of this tax break, you may still qualify for a reduced gain exclusion privilege. Again, your tax expert will be able to advise you further.You don’t even have to spend your sale proceeds on a new home. Fancy a cruise or a new car? Your money is yours to spend how you wish, just remember that you still need a roof over your head!